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Arkansas: Here's more evidence that you shouldn't freak out over REQUESTED rate hikes yet

Mon, 06/06/2016 - 11:20pm

So just last Friday I posted the weighted average requested rate hikes for the Arkansas individual market; it came in at 14.9% overall, which is actually one of the lower statewide averages this year. As a reminder, here's what how the breakout looks:

OK, so 3 major carriers asking to jack up rates 15-24%, plus one at 8.5% and two others with just 7 enrollees between them (one of which is, once again, Freedom Life Insurance). So what?

“Due to statute, the requested rate increases by insurance companies are subject to the approval of the Arkansas Insurance Department. At this time, with the information we have on hand, including historical patterns, Governor Hutchinson and I do not believe there is substantive justification for these rate increases. For that reason, we expect to take action to deny the requested rate increases until there is sufficient justification to properly consider any rate increase.

Wow. That's right--the Arkansas state insurance commissioner and governor are both telling the carriers "No Soup for You!" when it comes to their double-digit rate hike requests. Two points:

First of all, they only list the 3 major carriers in the press release itself (QualChoice, QCA and BCBS); they shrugged off Coventry and Freedom Life, which makes sense given their virtually nonexistent enrollment numbers (and Freedom Life's increasingly curious omnipresence in almost every state).

More to the point, however, the fact that a solidly GOP administrator is telling the insurance carriers to go pound sand is very interesting indeed. Now, it's possible that there's some shenanigans going on behind the scenes here...but it's also entirely possible that Commissioner Kerr is actually (gasp!) taking his job seriously, and that he truly has crunched the numbers for these carriers and honestly believes that their requests are excessive.

UPDATE: As pointed out by farmbellpsu in the comments, it's perfectly conceivable that he should allow the hikes to go through by all rights, and that denying the increases is not being responsible, since part of the regulators job includes making sure that the carriers stay solvent enough to pay the claims of their enrollees as well...

In any event, if he's simply doing his job properly, then kudos to him and Gov. Hutchinson...and this is a perfect example of why people shouldn't freak out by the 20%+ requested rate hikes being thrown around everywhere. Yes, I'm one of those who's been documenting those requests, but this is why I'm also constantly pointing out that none of these have actually been approved as of yet. That's what those 2 blank columns at the right of the table above are for, after all.

It will be fascinating to start filling in those columns and seeing how the approved rate changes compare with the requested ones later this summer/early fall.

In the meantime, however, it looks like QCA, QualChoice and AR BCBS might be looking at sub-10% hikes after all.